Yum Brands Earnings Preview: Fourth Quarter 2008

Yum Brands [[YUM]] is scheduled to report their fourth quarter 2008 results after the market closes on Tuesday, February 3. Based on our analysis, we at EarningsPreview.com are expecting YUM to report inline results that meet Wall Street’s expectations.

 

Analyst Expectations

We are forecasting revenues of $3.36 billion and EPS of $.45. This would represent a 3% growth in revenues from last year’s $3.26 billion in the same period. The current analyst consensus calls for revenues of $3.39 billion and $.45 EPS.

 

Yum Brands is one of the few companies uniquely positioned to grow in the coming quarters despite the economic headwinds. Domestically, they offer value to cost-conscious consumers by presenting viable trade-down options along with variety in their Pizza Hut, Taco Bell, KFC and Long John Silvers franchise offerings.

 

The company is also poised to capture further international growth with its strong presence in China (approaching 3,000 stores) as well as many other international markets. The company expects 15-20% growth in China in 2009 fueled by 500 new store openings. In addition, to opening 900 new stores in other international markets.

 

Share Performance

Yum’s shares are down 4% since the beginning of the year. Last year, Yum Brand’s  shares fell 19%, which wasn’t too bad considering the 34% drop in the Dow Jones index. 

 

Valuation

Shares are now trading at 15x consensus 2009 EPS estimates. This is essentially inline with their peer group and appears to reflect the fair value of the company. 

 

Recommendation: Hold with a $30 price target.

 

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